Mergers and acquisitions have undeniable value. Companies that engage in mergers and acquisitions activity have greater average shareholder returns than inactive companies. Many leaders become derailed in merger integration while having the best of intentions to employ M&A to enhance their organic efforts. Business leaders cite people, culture, change management, and communication as the top causes for integration failure, yet few firms fully comprehend how to address these difficulties.
To secure a deal’s sources of value, both financial and organizational, and to make sustainable changes, merging companies must modify their employees’ day-to-day behaviour and mindsets.
Factors affecting Mergers
- System Dynamics: Every organization is made up of systems that are continually exchanging ideas. Internal politics, technology, the legal system, the IT system, and the accounting system all impact alignment and relationships, requiring change among connected business units and people.
- Structure-focused change: When two firms merge, adjustments such as downsizing and decentralization are almost certain to occur to cut costs and boost production and efficiency.
- Person-centred change: Human resource management must address issues such as reframing organizational goals and strategy, recruitment and selection procedures, stress management, employee training and development, and benefits to bring about such transformation.
- Profitable issues: Profitability issues include revenue loss, market share loss, low productivity, and engagement with restructuring and reengineering procedures that result in considerable changes in the organizational setup.
- Government Policies: The companies involved must be aware of the acquired company’s rules and practices and be proactive rather than reactive, especially when it is a cross-border acquisition.
Strategies to manage change during merger and acquisition
1. Determine where skill gaps and overlaps exist.
When you join forces with another company, the first thing that comes to mind for employees is their job security. To avoid panic, you should address staff concerns well ahead of time. And you should invest time outlining how your organization will appear after the merger long before you speak with employees. This will make skill gaps and overlaps more visible. In addition, it will be easier to manage change if you clarify the problem as soon as feasible.
2. Pay attention to the culture of the organization.
Bringing two organizations together will result in the blending of two distinct organizational cultures. This may cause issues, but it doesn’t have to. Culture can be one of your most effective instruments for managing change since it can autocorrect for things you can’t control. It would help if you met with teams across the firm to establish how processes will look after the merger to avoid cultural clashes. Before merging with another company, a robust business process reengineering approach can assist you in establishing a process framework. Prior to a merger or acquisition, focusing on culture will make it easier for you to integrate new personnel and streamline your transition.
3. Make it simple to communicate.
Throughout the purchase process, it’s critical to have clear and open lines of communication with staff. Consider putting together an organizational change management strategy and holding weekly meetings to review the latest merger news and answer any issues people might have. This easy step guarantees that everyone is on the same page and allows you to refute rumours while keeping everyone calm and focused on the same goal.
4. Define your goal
Mergers and acquisitions are a common growth strategy for many businesses. The concept is that combining highly profitable enterprises in similar but distinct areas can increase efficiency and profitability. This can be a good strategy, but only if all of the stakeholders are on the same page. You should convey your plan and explain how it matches your organization’s vision to ensure alignment. If buying a company gives you access to a new market, be upfront about your ambitions.
5. Work together
Organizational change can sometimes feel like it’s being forced from high, which can contribute to resistance to change. It’s critical to make the change as collaborative as possible. Recruiting integration teams is a terrific method to spread the weight of change management while also making individuals feel more involved. Employees can stay updated about organizational changes by participating in integration teams. While it is critical to plan for change, unexpected obstacles will always come. As you navigate change, you should build a plan yet remain adaptable. Keep these suggestions in mind to make your merger or acquisition a success.
Shift management is critical for any organization, whether it is a change in location or a change in the system. However, when it comes to mergers and acquisitions, change management becomes even more critical because it affects many people rather than just a few.
It is critical for companies considering mergers and acquisitions to recognize the importance of change management and to plan appropriately to ensure a smooth transition. Often, if the change is not managed properly, it might result in a situation where the condition is reversed.
You should definitely check out Effective Management of Change during M&A if you’re looking for more information and knowledge on the dynamics that prevail after a company acquisition.